We finally closed on our Anacortes house, and we couldn't be more happy with the start to our renovation project. I want to share some beautiful before pictures, explain our real estate investment criteria and the process of how how we got to this house.
These pictures are from the MLS listing, and they look really good. The editing and wide angle lens sure minimizes it's flaws, but don't be fooled by these bright photos, there is so much work to be done. The house is going down to the stud, and we will rebuild every system. It's going to be a brand new house when it's done.
The previous owners also did a great job improving the exterior so that it appears to be a solid house. The exterior is freshly painted, but the siding is just cheap plywood that will need to be replaced in the next 7 years. The roof is brand new, but the verdict is still out whether they installed the correct venting in the attic. The windows are new, but the interior framing is not to code.
The location is stellar, and I love the large, open, flat lot. There is lots of sunshine and outdoor space. The neighborhood is great, and just across the street, the homes have views towards the north, the water, and the town. Location is one thing you can't change, so I'm glad we won on that point.
Not that it even matters, but the house is 2 bedroom 1 bathroom. The layout lends itself perfectly to an additional bedroom and bathroom so that we can have a standard 3/2 arrangement. All the living space is on one level of 1380 square feet. I love the space and the future layout, and will go into more detail about the space planning in another post.
While that bright white room looks dreamy, the beginning state of the house doesn't matter because all the drywall needs to come off to expose the faulty framing and the lack of insulation, plumbing, and electrical in the walls. They just quickly covered everything up to sell it; including the floors, which were all nicely covered in brown paper. Under that paper are a million different layers of floors types and levels.
While this is going to be our primary home, we still think like real estate investors. That means that our house must have the possibility of providing us with income. We only looked at properties with additional studio buildings or basement mother-in-law apartments, which is actually pretty rare and hard to come by. This allows us to place a tenant in a separate part of our home so to provide us income.
The Fidalgo Fixer is perfect because there is a 540 square foot studio that is attached to the large garage in the back of the property. It has it's great own access while being separate from the main house.
Another mindset of a real estate investor is thinking of how they will add value to the property. Investors don't typically buy beautiful, retail homes, they like to buy the gritty ones that need improvement. That is exactly what we are doing.
We purchased the house for $255,000 with $5,000 in closing costs. There were also about $10,000 in closing costs that we paid to the bank and title company, so that puts us at around $260,000 in for the total purchase. I estimated rehab costs to be around $70,000, so now we are at $330,000.
So how much will the whole house be worth after the renovation? Zillow and I agree at around $405,000, the appraiser said $339,000, and who knows what a local agent or an actually buyer will think. We aren't selling the house, but it's nice to know that we have created equity with this project. That's value add.
Tim and I are not flipping investors, we are the buy and hold type; meaning, we like to have rentals for long-term, passive income. When we decide to move on to our next home, the Fidalgo Fixer is the perfect rental home. Let's just play with some possible rental numbers here for future rental analysis. Say we can rent the main house for $2100 a month and the studio for $900 a month, that brings us income of $3000 a month. While there are a multitude of expenses to consider when owning a rental, the biggest one is the mortgage PITI (principle, interest, taxes, and insurance). Our PITI is around $1500 a month, so that $3000 in rental income more than covers our main expense, plus more.
There is so much more to this real estate investor conversation, and I only briefly covered some of the basics of our decision. If you want more information on purchasing like an investor, I highly recommend checking out Bigger Pockets.
I am so excited to finally have a renovation project in our hands. I see other people's renovation projects and I get a little jealous because I want one too. I love construction and I love the process, and I'm so eagar to learn and experience this whole process. I'm sure we will run into our fair share of hiccups and issues, but that comes with the learning territory.
I'm also so excited to share our progress and document our experiences. The transformation of homes is one of my favorite things, and I can't wait to get started and get engrossed with all the construction, subcontractors, decisions, manual labor, and more for our new home.